A Blunder at the Money Factory

For the past few years, the Federal Reserve has been preparing to introduce a redesigned hundred-dollar bill into circulation. It will have a Liberty Bell that changes color, a new hidden message on Ben Franklin’s collar, and tiny 3-D images that move when you tilt the bill this way or that. But delay has followed delay. And now again: The New Yorker has learned that another production snafu has taken place at one of the country’s two currency factories, according to a document from the Bureau of Engraving and Printing.

The cause of the latest blunder is something known as “mashing,” according to Darlene Anderson, a spokeswoman for the bureau. When too much ink is applied to the paper, the lines of the artwork aren’t as crisp as they should be, like when a kid tries to carefully color inside the lines—using watercolors and a fat paintbrush.

Anderson said this happens “infrequently.” Still, this foul-up is only the latest embarrassment for the bureau. The redesigned hundred-dollar bill was meant to be released in early 2011, but has been delayed for the past two years because of a massive printing error, separate from the recent mashing problem, in which some notes were left with a blank spot.

This time, recent batches of cash from the Washington, D.C., plant contained “clearly unacceptable” bills intermixed with passable ones, according to a July memo to employees from Larry Felix, the bureau’s director. So the Fed is returning more than thirty million hundred-dollar notes and demanding its money back, Felix wrote. Another thirty billion dollars’ worth of paper sits in limbo awaiting examination, and Fed officials have informed the bureau that they will not accept any hundred-dollar notes made at the Washington, D.C., facility until further notice.

Felix’s letter says internal quality-control measures should have prevented the bureau “from delivering defective work,” and that those responsible would be held accountable. The bureau now has to race to meet an October 8th deadline for delivering the year’s cash orders and to finally get the new hundred-dollar bill into circulation as promised. To that end, Felix has ordered the country’s other money factory, in Fort Worth, Texas, to accelerate its efforts. “There are dire consequences involved here because BEP sells Federal Reserve notes to the Board to finance our entire operation,” he wrote in the memo. “If the BEP does not meet the order, the BEP does not get paid.”

The financial toll from the recent bungle is tough to know: the Treasury and the Fed have little interest in calculating it, let alone being transparent about it. Still, the direct cost probably isn’t greater than the sum of what the bureau pumps out in a few days. “Central banks are a bit like other businesses,” said Ben Mazzotta, a researcher at the Fletcher School’s Institute for Business in the Global Context who focusses on the costs of different forms of money. “They can draw down inventories or order additional product.”

There are other costs, though. Taxpayers will have to pay to inspect, correct, produce, transport, and secure all the additional money that will replace the botched notes. Disposing of the bad bills? That’s on taxpayers, too, as are the additional hours spent making up for the mistake by employees of the bureau.

A possible greater cost of these scrip shenanigans is diminished confidence in the greenback. The situation is akin to a magician getting caught unloading a crate of bunnies from the back of his truck. It threatens to injure the aura—the almightiness—of the dollar that enables most people to go about their business without ever stopping to examine the bills in their hand or to contemplate what gives them value. The only thing conferring value on those dollars, of course, is trust in other people’s trust in them, which is both weird and magnificent.